ETF Education Report: Pimco Municipal Income Fund III (PMX)

What this ETF is trying to do

Pimco Municipal Income Fund III (PMX) is an exchange-traded fund (ETF) listed on the NYSE. While the specific investment goals are not detailed in this report, the fund is categorized as an ETF asset type.

What the numbers show

When looking at this fund, it is important to understand the difference between price return and total return.

• Price Return: This measures only the change in the share price. For PMX, the one-year price return was approximately -14.36%. The year-to-date (YTD) price return was approximately -9.24%. Over three years, the price return was approximately -32.39%.

• Total Return: This is a different measurement that includes the impact of distributions. The one-year total return was approximately -9.61%. The YTD total return was approximately -6.18%. Over three years, the total return was approximately -20.53%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was $7.80. The current price is $6.68. If you had invested $10,000 into this fund one year ago, the share price alone would have dropped to approximately $8,564 before accounting for any distributions.

Income and distribution explanation

This ETF has a distribution yield of approximately 5.93%. This means the fund pays out cash relative to its share price. The trailing distributions were $0.396, and the fund usually pays these out monthly (12 times in the last year).

It is important to remember that a high distribution yield does not mean an investor earned that percentage as a total return. While distributions provide cash income, they do not guarantee that your original investment (your principal) will stay the same.

NAV erosion explanation

This fund has a "severe erosion-risk flag." This means that StockValueFinder's screening rules detected significant price deterioration. The fund has an erosion-risk score of 30, which is labeled as "significant price erosion."

"NAV erosion" refers to a decline in the value of the fund's underlying assets. While a falling market price is a "share-price decline," a severe erosion-risk flag suggests the fund is experiencing substantial price deterioration. When a share price falls from a high level to a much lower level, it can destroy the principal an investor originally put in. Income investors often prefer funds where the price stays steady or goes up slightly, because if the price collapses, the cash income may not be enough to make up for the loss in value.

Pros

• The fund provides regular cash distributions, which occur usually on a monthly basis.

Cons

• The fund has experienced significant share-price declines over the last year and three years.

• There is a severe erosion-risk flag present.

Beginner takeaway

High yields can sometimes be misleading. If an ETF's share price is dropping quickly, the cash it pays you might not cover the loss in the value of your investment. Always look at both the price return and the total return to see the full picture.